CHAPTER 13 Close Corporations

1. True or False
a. A stockholder may act as director without need of election but is liable as
stockholder only.
b. Stockholders who are involved in the management of the corporation are liable in
the same manner as directors are.
c. Quorum may be greater than mere majority.
d. Transfer of stocks to others, which would increase the number of stockholders to
more than the maximum is valid.
e. Corporate actuations may be binding even without a formal board meeting, if the
stockholder had acknowledged or ratified the informal action of others.
f. Pre-emptive right extends to all stocks issued.
g. Deadlocks in board are settled by the SEC, on a written petition by any stockholder.
h. Stockholder may withdraw and avail of his right of appraisal.
2. A close corporation is one whose articles of incorporation should provide that
a. T/F. All the corporation’s issued stock of all classes, exclusive of treasury shares, shall
be held of record by not more than a specified number of persons, not exceeding
thirty;
b. T/F. All the issued stock of all classes shall be subject to one or more specified
restrictions on transfer permitted by this Title;
c. T/F. The corporation may be listed in any stock exchange or make any public offering
of any of its stock of any class.
d. T/F. Notwithstanding the foregoing, a corporation shall not be deemed a close
corporation when at least two-thirds of its voting stock or voting rights is owned or
controlled by another corporation which is a close corporation within the meaning of
this Code.
3. T/F. Any corporation may be incorporated as a close corporation, including mining or oil
companies, stock exchanges, banks, insurance companies, public utilities, educational
institutions and corporations declared to be vested with public interest in accordance with
the provisions of the Code.
4. What are the differences among close corporation, closed corporation and closely-held
corporation?
5. T/F. Restrictions on the right to transfer shares must appear in the articles of incorporation
and in the by-laws as well as in the certificate of stock; otherwise, the same shall not be
binding on any purchaser thereof in good faith.
6. T/F. Said restrictions shall be more onerous than granting the existing stockholders or the
corporation the option to purchase the shares of the transferring stockholder with such
reasonable terms, conditions or period stated therein. If upon the expiration of said period,
the existing stockholders or the corporation fails to exercise the option to purchase, the
transferring stockholder may sell his shares to any third person.
7. T/F. Whenever any person to whom stock of a close corporation has been issued or
transferred has, or is conclusively presumed under this section to have, notice either (a) that
he is a person not eligible to a holder of stock of the corporation or (b) that transfer of stock
to him would cause the stock of the corporation to be held by more than the number of
persons permitted by its articles of incorporation to hold stock of the corporation, or (c) that
the transfer of stock is in violation of a restriction on transfer of stock, the corporation may,
at its option, refuse to register the transfer of stock in the name of the transferee.
 8. When would the action taken by directors without meeting or at improperly called meeting
valid?
9. T/F. If a director’s meeting is held without proper call or notice, an action taken therein within
the corporate powers is deemed ratified by a director who failed to attend, unless he
promptly files his written objection with the secretary of the corporation after having
knowledge thereof.
10. T/F. If the directors or stockholders are so divided respecting the management of the
corporation’s business and affairs that the votes required for any corporate action cannot be
obtained, with the consequence that the business and affairs of the corporation can no
longer be conducted to the advantage of the stockholders generally, the Municipal Trial
Court, upon written petition by any stockholder, shall have the power to arbitrate the
dispute.
11. T/F. Any stockholder of a close corporation may, on some legal grounds only like whenever
any of acts of the directors, officers or those in control of the corporation is illegal, or
fraudulent, or dishonest, or oppressive or unfairly prejudicial to the corporation, compel the
said corporation to purchase his shares at their fair value, which shall not be less than their
par value or issued value.

CHAPTER 14 Special Corporations

1. T/F. An educational corporation may only be a non-stock corporation.

2. T/F. Even without recommendation of the Ministry of Education and Culture, the Securities
and Exchange Commission may accept or approve the articles of incorporation and by-laws
of any educational institution.
3. Board of trustees. True/False
a. Trustees if educational institutions organized as non-stock corporations shall not be
less than five nor more than fifteen.
b. The number of trustees shall be in multiple of five.
c. Unless otherwise provided in the articles of incorporation on the by-laws, the board
of trustees of incorporated schools, colleges, or other institutions of learning shall, as
soon as organized, so classify themselves that the term of office of one-fifth of their
number shall expire every year.
d. Trustees thereafter elected to fill vacancies, occurring before the expiration of a
particular term, shall hold office only for the unexpired period.
e. Trustees elected thereafter to fill vacancies caused by expiration of term shall hold
office for five years.
4. Case: MAC is a non-stock, non-profit educational corporation. True/False
a. To consider as such, it is not allowed to distribute dividends to its members, trustees,
or officers.
b. To consider as such, it is not allowed to earn substantial profit.
c. To consider as such, it is not allowed to give compensation to its volunteers and
workers.
d. MAC may provide for three years term for its board of trustees.